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    This assignment asks the student to: 1) explain put-call parity with respect to European options, 2) discuss the unrealistic assumptions of the Black-Scholes options pricing model, 3) define an option's implied volatility, and 4) provide two uses for implied volatility while noting that implied volatility is not always accurate.

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    This assignment asks the student to: 1) explain put-call parity with respect to European options, 2) discuss the unrealistic assumptions of the Black-Scholes options pricing model, 3) define an option's implied volatility, and 4) provide two uses for implied volatility while noting that implied volatility is not always accurate.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    25 views1 page

    Assignment One PDF

    Uploaded by

    lawjieyin
    This assignment asks the student to: 1) explain put-call parity with respect to European options, 2) discuss the unrealistic assumptions of the Black-Scholes options pricing model, 3) define an option's implied volatility, and 4) provide two uses for implied volatility while noting that implied volatility is not always accurate.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    Assignment One – Equity Options

    a. Explain put-call parity with respect to European options.


    b. What assumptions does the Black and Scholes model use that might make it, in
    practice, unrealistic?
    c. What is an option’s implied volatility?
    d. Give two (2) uses for implied volatility.
    e. Why is implied volatility not always accurate?

    (10 marks)

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